Product Market Dynamics and Mergers and Acquisitions: Insights from the USPTO Trademark Data

Using a large and unique trademark-merger dataset over the period 1983 to 2016, we show that companies with large trademark portfolios, newer trademarks, and fast growth in trademarks are more likely to be acquirers, while companies with newer and more focused trademarks, and slower growth in trademarks are more likely to be target firms. Further, firms with overlapping product lines as captured by trademark similarity are more likely to be merged and these deals are associated with high combined announcement period returns. Post-merger, merger partners with overlapping product lines cancel more trademarks as well as to register fewer new trademarks, and are associated with lower costs of goods sold, lower advertising expenses, higher return on sales, and larger market shares. We conclude that eliminating product market competitors is an important driver of acquisitions.